The times, as singer Bob Dylan might say, are indeed a-changin’. Market forces are increasingly ceding the high ground to statism as a new economic reality favouring public over private enterprise takes hold in economies that had previously seen the state’s role as a “dead hand”. To some extent, this is a case of force majeure as the Covid-19 pandemic has overwhelmed the ability of the private sector to cope, financially and logistically, with the impact of lockdowns and supply interruptions, forcing governments to step into economic activity on a grand scale. But there is more to what is happening than simply a pandemic reaction. It marks a growing realisation that the acute challenges of our time, be it coping with health emergencies, warding off climate catastrophe or building infrastructure, are just too big for the private sector to manage. Emblematic of this was the declaration by Yukio Edano, leader of Japan’s main opposition political force, the Constitutional Democratic Party of Japan, that it will break with the pro-private-sector neoliberal policies that have dictated economic policymaking for decades in and beyond Japan. Likewise, a predicted “blue wave” of Democrat victories in US presidential and congressional elections would presage a shift towards public-sector initiatives (if not Bernie-Sanders-style socialism ). Without embracing Chinese state capitalism, the United States and Japan appear to be shifting towards economic statism. The need for such a shift in attitudes and ideologies towards public-sector initiatives was forcefully brought home by the outbreak of the Covid-19 epidemic. Economic activity all but collapsed around the world and only massive infusions of public money has staved off a depression (so far). Central banks, which are (mainly) public institutions, have underwritten much of this fiscal stimulus while also propping up endless numbers of private financial institutions and businesses. But private capital investment has plunged and that is where the next big public-sector push needs to happen. The International Monetary Fund’s latest Fiscal Monitor publication offers a ringing endorsement of public intervention beyond simply coping with the health emergencies and providing lifelines for households and businesses – huge though that challenge is. It said that “increasing public investment in advanced and emerging market economies could help revive economic activity from the sharpest and deepest global economic collapse in contemporary history [and] create millions of jobs directly in the short term and millions more indirectly over a longer period”. ‘We’re all socialists now’: a turn towards Chinese-style state capitalism The IMF’s deputy director of fiscal affairs, Paulo Mauro, even went so far as to suggest (according to the Financial Times ) that “you get a bigger bang for your buck from public investment because investment by private firms is very low” – a far cry from the neo-liberal creed of the recent past. A key area where capital investment needs to be stepped up by quantum amounts is in physical infrastructure , such as transport, energy and communications. Total needs in advanced and developing economies could be upwards of US$100 trillion and funding shortfalls in the tens of trillions. There was no way these needs were going to be met by private capital investment even before Covid-19, because the perceived risks were too high. The pandemic has dramatically increased the predicted burden (and funding shortfall) in areas such as health care , medicine and sanitation. Even before the pandemic, global private investment had been weak for over a decade, despite (as the IMF again notes) crumbling roads and bridges in some advanced economies and massive infrastructure needs in transport, clean water and sanitation facilities in emerging and developing economies. Investment is also needed urgently in sectors critical to controlling the pandemic such as health care, schools, buildings, transport and digital infrastructure. The challenge is huge and yet, so are the funds potentially available in the private sector to meet them, if only the confidence to invest exists. The United Nations and others have estimated that some US$300 trillion is held by private financial institutions in the form of funds under management. New, bold visions of growth needed to kick-start the global economy Confidence can be restored only if governments are prepared to take the lead. The IMF estimates that increasing public investment by 1 per cent of gross domestic product could strengthen confidence in the recovery and boost global GDP by 2.7 per cent, private investment by 10 per cent and employment by 1.2 per cent. Disciples of economic neoliberalism have often accused governments of “crowding out” private investment. What is needed now, however, is for the public sector to “crowd in” investment from private-sector enterprises whose confidence and balance sheets have been shaken by the pandemic. Meanwhile, firms have turned to precautionary saving and to shedding labour, rather than investing. The official response has been to direct public funds into subsidising employment and wages. But that is a means of preserving current spending rather than promoting capital investment. The times are a-changin’ but they need to change faster. Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs